Gold settles higher, then moves lower after Fed rate-hike decision

Price action

• Gold for June delivery
  GC00,
  +0.08%

  GCM23,
  +0.08%
  tacked on $13.70, or 0.7%, to settle at $2,037 per ounce on Comex. The Fed decision came after the day’s settlement, paring some of the day’s gains to bring prices to $2,034.60 shortly after the announcement.

• Silver futures for July 
  SI00,
  +0.49%

  SIN23,
  +0.49%
  climbed by 6 cents, or 0.2%, to end the session at $25.68 per ounce.

• Platinum futures for July
  PLN23,
  +0.37%
   fell $16.50, or 1.5%, at $1,061.80 per ounce, while palladium futures for June lost $4.20, or 0.8%, to $1,416.80 per ounce

• Copper futures for July delivery
  HGN23,
  -0.03%
  declined by 2 cents, or nearly 0.5%, at $3.85 per pound.

Market drivers

Gold and silver futures finished higher Wednesday with the trading session focused on the Fed’s announcement, which came after the Comex settlement.

A half-hour after the Comex gold settlement, the Fed announced an increase of a quarter percentage point in its key interest rate to a range of 5% to 5.25%. The U.S. central bank also reworked the language in its statement to scrap prior language that “some” additional hikes “may” be needed.

Read: Fed’s 10th hike has pushed interest rates to their highest level since 2007. Will there be a pause now?

The language accompanying the increase “seems to indicate the Fed was more-likely-than-not to pause increases and gauge the cumulative effect of past hikes, including their effect on the banking system,” Jeff Klearman, portfolio manager at GraniteShares, which runs the GraniteShares Gold Trust
BAR,
+0.74%,
told MarketWatch.

Gold futures in electronic trading have slipped below the Comex settlement prices but have held on to a gain for the session as “longer-term Treasury rates fall and the U.S. dollar weakens,” said Klearman. “It seems likely gold prices will continue to be supported going forward as well.” 

Ahead of the Fed decision, Adam Koos, president at Libertas Wealth Management Group, said that whether this is the final Fed rate hike or not, gold prices soared on Tuesday because “reality is setting in.”

“This past Friday was THE breakout gold investors have been waiting for, as gold closed at a monthly all-time-high,” he told MarketWatch. “If prices can hold above the April close, the yellow metal has huge potential.”

The second biggest bank collapse in U.S. history is just adding fuel to the fire, said Koos. “Many are still expecting a recession later this year,” and “sprinkle in the fact that the U.S. dollar has continued to exhibit weakness — or at least the absence of the strength previously witnessed — and what we’re getting is a perfect recipe for much higher prices from here.”

In Wednesday dealings, the ICE U.S. Dollar index
DXY,
+0.10%
was down 0.7% at 101.28.